The Hallmark of Accurate Technical Analysis Money - order flow forex trading system

The Hallmark of Accurate Technical Analysis Money ~ order flow forex trading system

The hallmark of accurate Technical Analysis is the ability to spot market movements several days and weeks ahead of other Traders for larger trading gains. This puts you at a significant advantage when it comes to trading these expected moves, while confirming the superiority of your Methodology. A few examples of Chart Forecasts using only Candlestick Patterns and Signals shows how this accuracy can be achieved to provide real results, without the use of Statistical Indicators or Economic Analysis.

On July 1 this year, there was a Bullish Consolidation Breakout on the AUD USD that appeared to indicate the continuation of the strong uptrend in place. This would possibly have taken us to the 0,9757 Resistance of October 2013 and provide strong Day Trading and Swing Trading gains. 


DAILY CHART -  BREAKOUT

DAILY CHART - EXPECTED TARGET

 





















However, this would gave way to a strong Bearish Reversal Candle that took out our Stop Loss when we entered to go long.


DAILY CHART - FALSE BREAKOUT

With this sudden change, one had to now re-examine the Currency Pair to determine if it would attempt to rally once more or start a Bearish trend in favour of the US Dollar. Based on the range and the nature of the candles of the previous trends since July of 2013 (Section 5 - Consolidation Trading on the Forex Market) and this most recent False Breakout, the pair was now more likely to decline within the context of a large Pennant Consolidation.

DAILY CHART - CONSOLIDATION FORECAST

This expected decline to Support eventually began on September 9th when a Bearish Candle broke the Support of a Consolidation setup. This would lead to a sharp 600-Pip decline over 3 weeks, completing the formation of the Pennant with the 2nd Resistance point.



DAILY CHART - CONSOLIDATION BREAKOUT

DAILY CHART - LARGE PENNANT FORMED

Since this setup was in sync with the Methodology, my clients were able to take advantage with a 148-Pip trade between the 11th and 17th of September.

TRADE SETUP

DAILY CHART - AUD USD TRADE RESULT

Live Trades executed on Dukascopy Platform

The AUD NZD was another pair that offered a profitable trade in line with our strategy. It also formed another Consolidation pattern a few weeks later that was in line with my analysis.

On August 25, 2014, there was a brief Bullish breakout from a Consolidation pattern on the Daily Chart that allowed my clients to capture 69 Pips, just ahead of the reversal a few days later.



DAILY CHART- AUD NZD PENNANT 

DAILY CHART - AUD NZD 69-PIP TRADE

Given the large size of the Pennant that was being broken, most analysts would have expected the move to last for several weeks and provide hundreds of Pips in trading gains. Fortunately, based on the parameters of my Methodology, my clients would not have been caught by this reversal. Our targets are always set to anticipate these pullbacks in the market regardless of the long-term forecasts.

These targets are at major price points in the market that either lead to temporary pullbacks before the breakout continues or reversals in trend direction. Since one can never be certain about what will take place at these areas, we always exit there for large, assured, short-term gains (Section 6 - Consolidation Trading on the Forex Market).

As this reversal continued, the nature of the candles suggested that the pair would not go back inside of the Pennant but would form a smaller Consolidation above the Resistance (Section 5 - Consolidation Trading on the Forex Market).


DAILY CHART - AUD NZD FORECAST 

Trade executed on a Demo Account, but too Risky for a Live Account 

As can be seen in the chart below, our expected formation has now materialized. A Pennant has now been formed that could give way to another Bullish breakout for sharp Aussie gains.

DAILY CHART - AUD NZD PENNANT FORMED

Finally, the CHF JPY whose pattern of Consolidation reflected the ongoing story of low liquidity and market volatilty, was also projected to decline. This followed yet another False Bullish Breakout attempt above its Resistance boundary. 



DAILY CHART- CHF JPY PENNANT BREAKOUT

DAILY CHART - CHF JPY ENTRY SIGNAL

 

This reversal was expected to lead to a decline to the Support area at 111.91. Trading this movement was possible and my clients were able to capture 76 Pips of this decline after a small initial loss.

TRADE SETUP - CHF JPY

DAILY CHART - CHF JPY RESULT

 

SUMMARY

The accurate analysis of these major chart patterns can be done without Statistical Indicators or Economic Data that are usually late to the party. This market has a predictable cycle of patterns and signals that are seen across the Forex Market every day and for all Currency Pairs. Once they are identified and analyzed with the right set of Technical Parameters, your forecasts are more likely to match up with actual market movements- movements that can be traded for large and consistent profitability.

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(See "SWING TRADING STRATEGY & TRADE RESULTS" for Product Details)
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Duane Shepherd 

(M.Sc. Economics, B.Sc. Management and Economics)

Currency Analyst/Trader

Contact: shepherdduane@gmail.com

Twitter: @WorldWide876

Facebook: DRFXTRADING 

More info for The Hallmark of Accurate Technical Analysis Money ~ order flow forex trading system:

70 OF TOP TRADERS BEATEN BY DRFX TRADING - forex binary options trading system

70 OF TOP TRADERS BEATEN BY DRFX TRADING ~ forex binary options trading system

Since its inception in July of this year, the Trading Service offered to clients has provided them with five trade setups. These included two losses on a long position on the AUD USD and a short position on the CHF JPY. However, gains from a long position on the AUD NZD and short positions on the AUD USD and the CHF JPY were more than able to compensate for these losses. Overall, these results were equivalent to a rate of return of 8.0% between July 1 and October 10, 2014. This was higher than the Year-To-Date returns of 70% of the Top Currency Traders in the latest BarclayHedge Rankings as at September 30, 2014.

RATE OF RETURN (5% RISK PER TRADE)

 BARCLAYHEDGE RANKINGS AS AT SEPTEMBER 30, 2014 

 

Centurion Fx Ltd. (6X) - (3.35%)

This company uses a combination of Swing Trading (1-2 days) and Intraday Trading (1-5 hours) strategies as part of their systematic trading model. They also use Trailing Stops in targeting a 2 to 1 Reward to Risk Ratio with a small risk exposure per trade. While the use of Trailing Stops is a very popular way of locking in profits ahead of reversals, this can be a double-edged sword that limits profitability. 

Markets have a natural tendency to wave and pullback as they make their way towards major price points. If, through manual interference or computer programmes/algorithms, Trailing Stops are implemented, trades can be prematurely closed at these temporary pullbacks before they have a chance to reach larger profit targets.  It is for this reason that I have identified the areas that provide the strongest protection from these waves early in the trend, so that the maximum benefit from a profitable trend is obtained. In doing so, I also target trends that last beyond 2 days to capture an even larger share of Pips that are offered by the market on a weekly basis -the Weekly Range. 


LCJ Investments SA (LCJ FX Fund Strategy) - (11.72%)

This company uses a fundamental and discretionary global macro strategy expressing both directional and non-directional views on currencies using FX options. The investment universe includes major currency pairs, non-traditional crosses, and emerging market currencies. The Strategy has two distinct areas of investment: 1) Medium Term Allocation - invests in directional trades on currencies on a 2/3 month basis 2) Long Term Allocation - invests in directional and non-directional trades on currencies on a 6/12 month basis. These two areas of allocation seek to offer broad diversification in terms of time horizon, product, and investment objective: allocating across different time horizons, allocating to a range of currency pairs including majors, relative value crosses and emerging, and through using a combination of vanilla and barrier FX OTC option and spot products, which we believe have characteristics that assist the portfolio by not being constrained to the linear (spot) universe. Full portfolio transparency is available to each client.

In contrast to this approach, my Methodology targets the Short-Term period of a few days to a week. While this may be more volatile relative to a 3 to 12 month time frame, it reduces the level of investor uncertainty that is more of a factor within this extraordinary policy environment. The low interest rate policy by the major central banks has also reduced the influence of interest rate differentials on currency demand, making long, stable trends a very rare occurrence. This has led to the formation of Consolidation patterns that have become more prevalent in the absence of meaningful trends. As such, a strategy that is able to incorporate these patterns into its tool box is of greater value to clients seeking profitability in all market conditions. 


P/E Investments (Standard - 18.47%, Aggressive - 28.44%, Conservative - 8.89%) 

These three strategies used by this company involve a systematic dynamic process utilizing a Bayesian statistical approach. The program invests in all major currencies by constructing an optimized portfolio that maximizes return for a given volatility level. Specifically, the FX program utilizes several fundamental factors to forecast returns for each currency on a weekly basis. These forecast returns are combined with the current volatilities and correlations to determine positions in each market that will yield a targeted risk level and maximum return. The process is systematic and therefore reliable and the process is dynamic. Each variable is re-weighted depending on its effectiveness. As variables become more effective they increase in weighting and as they become less useful, their weighting is automatically reduced. In summary, the FX program is disciplined dynamic systematic fundamental process that is risk managed to a risk level designated by the client. 

As an Economist, I can appreciate the use of economic factors in the analysis and forecast of currencies. Surprisingly, however, such a comprehensive approach is totally unnecessary in being able to accurately predict market movements. All Currency Pairs have a cycle of technical patterns which, once identified and understood, provide all the information needed to make trade decisions. Weekly economic data is also often volatile and uncorrelated to actual currency direction and can therefore be misleading. Candlestick Formations, Trend Lines, Consolidations and the average Weekly Range of each Currency Pair are all the tools required to predict 90% of the market’s most profitable movements.
 

THE METHODOLOGY

The trades that are shown here were developed from a Price Action-based strategy that uses the most accurate Candlestick Patterns and Signals of the Daily and 4 Hour Charts. These time frames provide more stable and reliable trading patterns and are thus more amenable to consistent profitability. Specific combinations of Chart Patterns and Signals on these charts have been found to continuously provide the most profitable trading opportunities across all Currency Pairs in the Forex Market. Once these signals are identified and traded within the context of established Rules and Parameters, larger rates of returns are more likely for both Retail Traders and Currency Fund Managers.

The Methodology involves exploiting the Trending and Range bound patterns of a Currency Pair over the Short-Term (4-7 Days). It does so by utilizing the Signals and Setups on the Daily and 4 Hour Charts to identify the most profitable breakouts that provide a large number of Pips per trade. The New York Close of the Daily Chart is used for to obtain these Signals from FXCM while the trades are executed on my Live Account at Dukascopy. The main aspects of the Methodology are;

• Identification of Market Direction using Candlestick Patterns;
• Using the Daily & 4 Hour Charts for Entry Signals & Stop Placement;
• Aiming for 100 to 200 Pips per trade;
• Trading to the Weekly and Monthly Ranges of each Currency Pair;
• Risking 5% per trade (90-120 Pips);
• Holding Trades for a Pre-Determined Number of Days to eliminate the uncertainty of when to exit Profitable Trades - the Achilles Heel of traders.

The risk per trade is not fixed. Each client is able use a risk level that is in keeping with their risk tolerance and their required rate of return. The Methodology does not utilize Statistical Indicators nor is it dependent on the subjective analysis of short-term Economic Data. Although many successful traders include indicators in their analysis of the market, most of these indicators are lagging in nature given their use of past price data. Short-term Economic Data released on a daily basis can be quiet volatile and are often uncorrelated to the most profitable currency movements.

TRADE RESULTS


CHF JPY OCTOBER 6- OCTOBER 10, 2014

Trade Type	False Consolidation Breakout
Signal Given	Daily Chart Bearish Candle
Target	Near End Value
Result	76 Pips

 
This pair was reversing inside of the Pennant Consolidation after a False Breakout Bullish.


DAILY CHART- PENNANT, UPTREND

 

















DAILY CHART - FALSE BREAKOUT

FXCM Charts used for Trading Signals and Setups based on New York Close Daily Candle

There was an initial uncertainty about the viability of the trade which led to a small loss of 9.5 Pips when the trade was closed earlier on. However, after confirming its adherence to my rules, entry took place on the 4 Hour Chart a few days later. At the end of the established holding period, the trade captured 76 Pips.

DAILY CHART RESULT

Dukascopy Swiss Forex Marketplace used for Live Account Trades

 KEY CONCEPTS OF TRADE

• False Breakouts move to the other end of the Consolidation;
• Holding Period;
• Near End Value;
• Entry at Follow-Up 4 Hour Setups;

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AUD USD  - SEPTEMBER 11 - SEPTEMBER 17, 2014

Trade Type	Consolidation Breakout
Signal Given	Daily Chart Bearish Candle
Target	Breakout Equivalent
Result	148 Pips

 
This pair was breaking out of large Pennant Consolidation.


DAILY CHART SETUP

Entry then took place at the third candle with the Stop Loss and Take Profit targets set based on the parameters of the Methodology.


DAILY CHART- ENTRY SETUP

After 4 Days, the target was hit for 148 Pips, following a temporary pullback close to the opening price.


DAILY CHART- TARGET HIT

DAILY CHART- LIVE ACCOUNT RESULT

 KEY CONCEPTS OF TRADE

• Breakouts from Consolidations are often fast and sharp;
• Temporary Pullbacks can take place before targets are hit;
• Stop Losses placed at the right area protects trade from unexpected spikes;

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AUD NZD  - AUGUST 27- SEPTEMBER 3, 2014

Trade Type	Consolidation Breakout
Signal Needed	Daily Chart
Target	Breakout Equivalent
Result	70 Pips

The setup for this trade was a simultaneous breakout from a large Pennant and the Range pattern on top of its Resistance boundary.

DAILY CHART CONSOLIDATION

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